We encounter many situations wherein we have to rely on loans. And where there is a loan there is a debt that follows.
We often become perplexed and overwhelmed after seeing the debt pile. This is often due to mismanagement. All that is required is a sense of systematic financial arrangement that will allow you to be on time with repayments or even be an early payer.
We will list down some ways through which you can pay off your debts in a much faster way.
1. Go for Bi-weekly Payments. You can choose to pay the lender every two weeks instead of the regular monthly repayment
Paying your loan early will save your money that amounts due to the interest. This will also decrease the overall term of the loan.
With the surplus money, you can do so much with your life. You can invest it, or you can save it for retirement or you can pay off other debts.
However you need to consider this with your lender first. There should be no penalties associated with an early payment.
2. You can speed up the repayment procedure with each salary hike you get.
You can do that by incrementing the EMI account with every hike in your income. Even a moderate increase in the income saves a great deal of interest. For example If you get an increase of 7 to 8 percent then you can easily increase the EMI amount by a 4-5 percent. This little increase in the EMI can lead to the completion of loan repayment at a much faster rate thus saving a lot of interest and time.
3. Choose the path of Refinance when you have many loans in your basket. Taking a loan against your existing asset again helps in waving off other debts in place, and also helps in reducing the overall interest rates that are spread over multiple debts. We will explain how.
Refinancing basically is paying off your existing loan, and going forward with a new one, while using the same property as collateral or security. You can utilise refinancing for reducing the term of a longer mortgage, or for a switch from a fixed-rate to an adjustable-rate mortgage.
4. You can convert the credit card dues to EMI’s. Credit cards are otherwise convenient, but they also give you a hard time, if you spend without thinking.
If the credit card bills become insanely high, then it is time for you to ask your credit card issuing company to convert your due payments into EMI’s. Many of the credit card companies allow the customers to pay off in 6-12 EMI’s. However if the amount is large, then it might even get extended to 24 months.
5. You can resort to rounding up of the payments. Here you will have to spend a little extra money. But this leads to saving your money in the long term on the interest rate, and also shortening your loan period.
6. Most importantly, bring in a wave of change in your lifestyle too. It is important for you to strike a balance between what you spend and what you save. Do not run into recurring debts. Also keep in mind that paying off debts after the due date affects your creditworthiness. So it is advisable to pay on time, and not fall prey to debt traps.
So do not run away from repayments. Investing in the healthy habit of paying on time will help you out to steer clear of debts and will also help you to live in financial stability.